Germans are known for their hospitality. And their welcome gets warmer when the guests are from a country that has pulled back a few companies from insolvency.

This was apparent during a recent visit to three closely-held German companies which fell into bad days after the 2008 recession which cut through many sectors, among them the automobile and auto component sector in the West. These three auto-component companies, some nearly 150 years old, were facing insolvency when they were acquired by the Kolkata-based Pawan Ruia group engaged in the tyre and the engineering segment.

These companies — Draftex (formerly Henniges Grefrath), Gumasol and Ruia Global Fasteners (formerly Acument) — are on a recovery path, and some have begun rehiring old employees. There is now an air of cautious optimism.

Take the case of Draftex. Based near Dusseldorf in Germany, this company makes sealants for the automobile-makers with auto majors Audi, Diamler, BMW and Volkswagen among its clients. Orders started drying up during the recession and totally disappeared in some cases. Employing 1,039, Draftex, found itself staring at insolvency, as pacts with labour unions kept wages pegged at high rates (at times Rs.1,260 per hour) while competition from within Germany and the low-cost economies, eroded margins.

In 2009, it came into the Ruia-fold with 59.9 per cent of the equity. Of the rest, 15 per cent remained with Jurgen Hien, now Joint Managing Director and the rest with the administrator.

Things have started to look up now said Mr. Hein, as he took visiting journalists through a tour of the plant which now works in three shifts and has begun rehiring (from 401 at insolvency, employment now stands at 539).

In its first full-year of operation (ending December 31, 2010) Draftex exceeded its sales target (now at 48.1 million euro). Although this is lower than before, Mr. Hein is upbeat on being identified as a strategic supplier for Diamler and Volkswagen. “This gives us an opportunity to do joint product-development.” Such initiatives take time to translate into orders but no one is complaining.

Another company Acument, (now renamed Ruia Global Fasteners), based in Neuss, has four plants and a logistic centre. This buy allowed the Ruia group to get into the fastener segment.

Acument was billed as one of the two leading automotive fastener-makers in Germany whose core competencies were making special screws, ball-studs, assembly-parts and connecting rod bolts for the auto industry. It too charted a similar course during the 2008 crisis, culminating in insolvency in 2009. It is now trying to win back orders it lost with auto-majors like Mann and Daimler and is hoping to claw back to its position of eminence. Following restructuring by the administrator, it has started rehiring and investing in latest cost-efficient machinery.

The scene is similar at other RGF units — the Beckingen and the Neuwied plants. The Beckingen plant founded in 1872, specialises in making long-shafted parts and was owned by a private equity firm till 2006. Eventually, it went to an administrator and came to the Ruia-fold this year.

Gumasol, another German company, is now with the Ruia group following a 2010 acquisition. It makes solid tyres and rubber compounds. It had outsourced nearly 38 per cent of its production to beat cost-blues but is still facing pressures on its margins and may have to increase outsourcing to 50 per cent for tyres and some more recasting is imminent.

These companies, along with the U.K.-based Shlegel Automotive, have given Pawan Ruia a foothold in Europe's automotive sector and he is thirsting for more. More buys in Germany and elsewhere are being eyed by the man who burst in to Kolkata's corporate scene with his acquisition of the ailing public-sector Jessop and then the closed Dunlop India and Falcon Tyres. He followed his purchase of the heritage companies with the acquisition of Montona Tyres and then a company in Malaysia before embarking on his European hunt. While most of these companies are on track, the performance of some like Dunlop remains a challenge, as it is taken as a litmus-test of his skills as a turnaround-master on his home ground.

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